EUR/USD: An update on upcoming monetary events

The EUR/USD, one of the most reliable barometers of risk appetite on financial markets, fell below the base of a bearish graphic model (see technical section), as two major monetary meetings on both sides of the Atlantic approach.

On the European side, the ECB is completing a new Governing Council on 12 September. Konstantin VEIT, portfolio manager at PIMCO, believes that the central bank "will reduce the interest rate on the deposit facility by 25 basis points", but doubts that "the Governing Council will provide much guidance beyond September". "The teams' new macroeconomic projections should change little, and continue to show inflation close to target in 2025 and 2026."

Thomas Giudici, head of bond management at Auris Gestion, also assures that "an easing of rates is hardly in doubt", but nevertheless expects "that the ECB will get a little more involved in the continuation of the easing of its monetary policy."

There is no doubt that the ECB will allude to the persistent difficulties that German industry is going through, under very high surveillance.

On the American side, the Fed is finishing a new meeting of its Federal Open Market Committee (FOMC) on September 18. A historic meeting that will mark the beginning of the process of monetary easing by direct action on rates. "If a 25 bps cut in key rates seems to be a given (a first since the plateau reached over a year ago), is it possible that the latest economic data will allow the American institution to make a 50 bps cut?" asks Thomas Giudici, who considers that "the latest jobs data are not bad enough to justify an overreaction by the Fed even though they confirm the slowdown in the labor market."

On Friday, the monthly report on private employment in the United States, without being catastrophic, rekindled doubts, to the point of weighing heavily on Wall Street, particularly on the technology side of the stock market.

Because if the unemployment rate remains stable at 4.1% of the working population, the number of job creations in the private sector (excluding agriculture) stands at 141,000, well below the target. So, of course, the result is not as bad as in July (113,000), but it rekindles the debate on the nature of the landing of the American economy. In other words, the soft landing, and a fortiori the kiss landing, is no longer so relevant. Finally, the average hourly wage, at +0.3%, exceeds the consensus.

In terms of statistics on Monday, there was little to get your teeth into. Investors took note of the Sentix investor confidence index, down to -15.3, missing expectations that were already pessimistic. Germany naturally weighs heavily in this score.

Right now, the EUR/USD is trading at $1.1031.

KEY GRAPHIC ELEMENTS
A shoulder, head and shoulders graphic pattern, on an oblique neckline basis, is emerging, even though the RSI relative strength indicator is sending negative messages.

MEDIUM-TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the EUR/USD.

Our entry point is at $1.1030. The price target of our bearish scenario is at $1.0759. To preserve the capital invested, we advise you to position a protective stop at $1.1111.

The expected profitability of this forex strategy is 271 pips and the risk of loss is 81 pips.